A private client lawyer sets out the questions he has about what he looks for in an offshore jurisdiction; the trends that are unfolding and the centres which are making most headway.

What sort of considerations apply when choosing an offshore location? Some might respond that tax, regulations and ease of doing business are likely to be uppermost in mind, but it can be more complex than that. How politically stable are such places? Is the government honest? And – in light of the COVID crisis – how rational and efficient is the system at handling viruses and the associated restrictions? Are travel connections quick and pleasant? Are there good schools and healthcare facilities and is the location a fun and interesting place in which to live? 

There’s a lot to take on board. To explore how to frame these questions is George Merrylees, partner at Wedlake Bell, the London-based law firm. The considerations are, by definition, global and we hope that the article will stimulate debate across our different editions. 

The usual editorial disclaimers apply and we invite people to jump into the debate. Email tom.burroughes@wealthbriefing.com

Many international private wealth practitioners have tried, and often successfully, to undertake a comparison of offshore jurisdictions. I will leave such a task to those who have global offices with boots on the ground.

As my firm is a single office based in central London with international affiliations, I will look at the world of offshore jurisdictions through the lens of a London private client lawyer, which is, after all, all I can really do. The questions I will address in this article are threefold:

(1) What factors motivate me to choose an offshore jurisdiction; 
(2) what trends am I seeing; 
(3) which offshore jurisdictions are charging further ahead; and what factors motivate me to choose an offshore jurisdiction?

Like many of my London colleagues, I am guilty of having a short list of favourite offshore jurisdictions. This is compounded by the fact that I know what I know, and I don't know what I don't know. But beyond that, I am surely influenced by experience, personal relationships and, possibly, the unconscious bias of a London practitioner who usually favours the Channel Islands. There is, of course, no logical reason for this if my clients come from outside the UK and, in some cases, have no link to the UK at all.

In my experience, the perfect solution is often not possible but I have met too many clients who end up putting their family wealth out of reach due to the structures they have used. This might be on account of the tax, the regulations, the overheads or the lack of foresight as to jurisdictional requirements that have been ignored.

So what would I say is my approach when it comes to choosing offshore jurisdictions? I can honestly say that, through trial and error, I have learned to recommend offshore jurisdictions that offer culturally intelligent solutions. 

In my opinion, and to avoid the problems I have mentioned, a culturally intelligent approach requires that the structures:
•    should be as easy to understand and use as possible by both the family members and any interested tax inspector; 
•    should be portable in that they can follow the family through the changes in their tax status. If such changes jeopardise the structures, then the structures should be easy to dismantle/restructure; 
•    should work efficiently and effectively across borders from a tax and compliance perspective; 
•    should be cost effective; and 
•    should be tax efficient but not at any cost.

An equally important consideration is the team of advisors with whom the family have to work in relation to their structure. In my opinion this is absolutely linked to choice of jurisdiction. 

I consider the fiduciary provider to be an integral part of the professional team that services the client. After all, the fiduciary might very well turn out to have the longer relationship with the client as the client moves from one jurisdiction to the next. So it is vital to me that I introduce a high calibre fiduciary team to the client and their family and that such team has the required expertise to accompany them in the long term. I take the same approach when I involve foreign lawyers on a client matter. It is for this reason that I will gladly go to a less established jurisdiction if I know that I am not compromising the professionalism and technical ability of the fiduciary service provider. 

The types of question I will ask myself when choosing an offshore jurisdiction can be summarised as follows:

1.    Which jurisdictions offer the correct structures to hold the assets owned by the client?
2.    How do the jurisdictions relevant to the client and his/her family interact or simply, react to the offshore jurisdictions and to the entities that we will consider setting up to hold the assets? 
3.    What is the relevant expertise I am looking for in the fiduciary provider? This will usually relate to the tax situation, the complexity of the client's affairs, international compliance as well as to the assets; 
4.    Is there a language requirement? and
5.    Will the client get on with the fiduciary provider? 
 

What are the trends that I am seeing? 
The trends that I see are, of course, influenced by the clients I act for, so I can only speak of what I see around me. In my experience and from speaking to immediate colleagues, we see the following trends:

1.    Clients are looking for more simple structures; 
2.    Clients are concerned about the portability of their structures; 
3.    For EU clients at least, some excellent jurisdictions such as the Channel Islands cause some to write them off on account of how their home jurisdictions might react to them; 
4.    There is a move by clients to onshore their structures to jurisdictions in the EU or if they are from Asia, to Singapore; 
5.    Clients are more concerned about proximity to their fiduciary provider;  
6.    Clients are more open to corporate entities rather than trusts to hold their assets; 
7.    Clients are more concerned about meeting the substance requirements; 
8.    Clients are more concerned about the technical abilities and expertise of the fiduciary provider; 
9.    Clients, especially if they are the beneficiaries, are concerned with costs; 
10.  Clients do not want to attract unnecessary interest from the tax inspector and are more concerned by the reach of the tax authorities; and 
11.  Jurisdictions are learning to become centres of excellence in certain service lines rather than trying to offer solutions to all.

Which offshore jurisdictions are charging further ahead
Given the relentless push from certain corners, offshore jurisdictions continue to be under the spotlight. For some of those jurisdictions, the last few years have been very difficult as they are targeted for allegedly not meeting global standards.

It appears that the offshore jurisdictions that will succeed are those that:

1.    Can manage and navigate the ever growing compliance requirements; 
2.    are agile and able to diversify; 
3.    can focus on a particular service line and excel at that (centres of excellence), be it funds, or insurance or even in relation to jurisdictional onward investment; and 
4.    can offer substance where required.